Agreement reached between European Parliament and Council on new product liability rules

December 20, 2023

The European Parliament and Council have reached a
political agreement on a new EU law on liability for defective products. The law is intended to update the current Directive to take into account that (a) many products now have digital features and (b) that the economy is becoming increasingly circular.

Digital economy

Under the updated Directive, the definition of “product”
will be extended to include digital manufacturing files and software. It excludes free and open-source software that is developed or supplied outside the course of a commercial activity.

The updated Directive also provides that online platforms
can also be held liable for a defective product if they promote the product or otherwise enable the transaction for the sale of the product in a way that would lead an average consumer to believe that the product is provided either by the online platform itself or by a trader acting under its authority or control.

Circular economy

In a circular economy, products are designed to be more
durable, reusable, reparable and upgradable. When a product is modified substantially, outside the original manufacturer’s control, and is made available on the market or put into service again, the Directive stipulates that the company or person that made the substantial modification should be held liable as the manufacturer of the modified product.

Right to compensation

The Directive also provides that an individual who suffers
damage from a defective product is entitled to compensation. Such damages include death or personal injury, including medically recognised damage to psychological health, damage to or destruction of property, as well as destruction or irreversible corruption of data.

The right to compensation will cover material and
non-material losses resulting from damage. to the extent that they are compensable under national law.

Due to the increasing technical complexity of many
products, member states must ensure that an injured person who claims compensation before a national court can request access to relevant evidence from the manufacturer to be able to prove their claim.

Products bought from non-EU manufacturers

Consumers are increasingly buying products from
manufacturers based outside the EU. However, the level of protection they receive should remain the same when those products prove to be defective.

The agreement provides that when a manufacturer of a
product or a component is established outside the EU, the importer of the defective product or component, the authorised representative of the manufacturer or, as a last resort, the fulfilment service provider (a company that typically takes care of the warehousing, packaging and dispatching of a
product) can be held liable for damages.

Burden of proof

One of the Directive’s objectives is to ensure that
consumers will have a fair chance of getting compensation in complex cases. When a claimant (e.g. the injured consumer) is faced with excessive difficulties, in particular due to the technical or scientific complexity of the case, to prove the defectiveness of the product or the causal link between its effectiveness and the damage, a court may decide that the claimant is only
required to prove the likelihood that the product was defective or that its defectiveness is a likely cause of the damage.

Next steps

The agreement will need to be endorsed by member states’
representatives within the Council (Coreper). If approved, the text will have to go through the formal adoption process in both the Council and the European Parliament. The new rules will apply to products placed on the market 24 months after entry into force of the Directive.

For more information see here
and here.